Elizabeth Warren: Crypto giants ‘collapsing under the weight of their own fraud’

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New York CNN—

Senator Elizabeth Warren, a longtime crypto critic, has warned that the recent turmoil in the digital asset space will only continue if a host of regulators fail to beef up investor protections.

Despite all their rhetoric about innovation and financial inclusion, crypto industry giants from FTX to Celsius to Voyager are collapsing under the weight of their own fraud, deceit and gross mismanagement, she said.

And when they sink, they take a lot of honest investors with them, Warren (D-Mass.) added during his comments Wednesday at an event hosted by the American Economic Liberties Project and Americans for Financial Reform.

FTX, Celsius, and Voyager all filed for bankruptcy last year as asset prices plummeted and the global crypto market cap plummeted by an estimated $2 trillion. Federal prosecutors have charged several former FTX executives, including founder Sam Bankman-Fried, with orchestrating one of the biggest financial frauds in US history.

The collapse of FTX in November sparked a contagion that continues to ripple through crypto markets, which remain largely unregulated and opaque.

Warren on Wednesday called on regulators, including the Securities and Exchange Commission and banking authorities, to double down on the tools they already have. They must protect consumers, educate investors and pursue meaningful consequences for bad actors, she said.

Crypto fraud is a big problem, but it’s one we can solve, Warren said.

The SEC over the past two years has gotten off to a good start in keeping crypto volatility out of the traditional banking system and blocking Bitcoin exchange-traded funds from reaching the market, she said. And without directly naming Bankman-Fried, Warren praised the SEC for accusing crypto scammers of defrauding ordinary investors.

But the SEC can’t fix everything.

All of our regulators need to step in, Warren said, calling on environmental and banking officials to step in.

Crypto mining companies pollute communities, they strain power grids and they drive up utility costs in communities from Texas to New York, she said. Both the Department of Energy and the Environmental Protection Agency have the power to require crypto miners to disclose their energy usage and environmental impact.

Warren said the rise of crypto-enabled banks has already opened the traditional banking system to increased risk, raising the specter of a crypto meltdown in which US taxpayers are left with the bag.

It is the job of banking regulators to insulate the banking system and taxpayers from the risk of crypto fraud. They have the tools and they must use them.

Finally, Warren said, wherever regulators don’t have the authority they need, it’s up to Congress to give agencies the tools they need to enforce the rules.

In her no-nonsense tone, she acknowledged crypto advocates who have long bristled at the idea of ​​greater regulation.

Tougher regulators, she said, would give the industry a chance to prove whether it can deliver on its promise of innovation without stealing from investors or laundering funds for drug traffickers and terrorists.

No financial industry should be able to write its own playbook, either you comply with the law or face serious consequences if you break it. Crypto is no different.

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